Once upon a time, Sears Holdings Corp. encouraged consumers to come see its softer side. Based on its most recent quarterly report, the retailer’s financial soft side is on full display, and investors don’t like what they see.

Sears’ quarterly loss widened from a year ago, revenue fell and margins tightened as the company grapples with lower foot traffic and waning demand. The disappointing results add to a string of quarterly reports that have magnified the struggles taking place at Sears.

“Another disappointing quarter,” is how Gary Balter, the bearish retail analyst at Credit Suisse, described the company’s results. Mr. Balter, who has an underperform rating and a $20 price target on Sears, pointed out the company reported a higher short-term debt balance from a year ago, which he dubbed as an “ominous” sign.

Shares recently fell 8.6% to $39.55 on more than twice the stock’s average daily trading volume, according to FactSet. The stock has lost about 1/4 of its market value over the past 12 months, including a 33% drop since late May.

“Sears remains on a dangerous downward spiral,” Mr. Balter said in a note to clients. “To finance operations and create liquidity, Sears continues to pare back on inventory, spinoff select businesses, and to sell some of its best locations. This is leading to even weaker operating results, which in turn is leading to additional dispositions of good locations.

“Given the multiple assets that Sears owns, including Lands’ End and some excellent real estate locations, this trend can continue for awhile,” he added. “However, at some point, if EBITDA does not improve one wonders if vendors get more concerned on the direction. Problems with retailers usually begin with vendors paring back, not with obvious liquidity issues.”

Sears, controlled by billionaire hedge-fund investor Edward Lampert, has lately been revamping its image to become more chic. Yes, chic. It’s secured upscale offerings for the Marketplace section of its website, which features goods sold by third-party vendors. Those offerings contrast sharply with the washing machines, tools and basic clothing that are the mainstays of the department-store chain.

In addition, Mr. Lampert has made e-commerce a priority, hoping to position the company to compete better with larger online marketplaces run by Amazon.com Inc. and eBay Inc. So far so good: Online sales from sears.com and kmart.com jumped 20%.

The problem, though, is online sales account for a tiny percentage of Sears’ overall revenue. Some analysts see the effort as a distraction from work needed to shape up the company’s stores, which account for an estimated 97% of its sales.

“It is becoming clearer that cash flow from operations will remain negative for some time after taking out CapEx, interest payments, and cash pension contributions,” Mr. Balter says.

“We guess time will tell, but at this stage, time does not appear to be on the side of this company.”